Question for the Money Doctors

Question submitted on Feb 14, 2013.

Question

i am offered a loan for 2 thousand and have three options to return back the loan
1. after 2 years return back 2.5
2. after first year 1.2 and second year 1.2
3rd option return instalmants 36 months of 2.5
which is best option for me

Answer

Assuming option 3 is based on equal installments, option 1 is costing you 11.8% interest. Option 2 is costing you 13.07% interest and option 3 is costing you 15.12%. So, option 1 is the cheapest, followed closely by option 2.